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Petroleum Federation of India

India Oil & Gas Overview & Opportunities


April 13, 2006

Deepak Mahurkar
Oil & Gas Industry Practice

  
Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Macroeconomic and Energy Indicators

India is a unique economy. Energy challenge is of fundamental


importance to India’s economic growth imperatives.

Population : 1.1 bn to 1.47 bn in 2031 CAGR 1.1%

Energy consumption : 304 to 1,112 kgoe/capita in 2031 CAGR 5.1%

Two Wheelers : 0.6 mn to 41.5 mn over 30 years CAGR 15.3%

Cars : 0.54 mn to 5.71 mn over 30 years ending 2002 CAGR 8.2%

Electricity : absent in 84 mn households in 2000 44.2% of total

Renewables in use. GHG emissions low. ~ 3% of Globe


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Macroeconomic and Energy Indicators

India has an ambition of high Economic Growth Rate.

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Macroeconomic and Energy Indicators

Energy intensity and elasticity are on downtrend already. Future


growth would need relatively more energy.

GDP Elasticity GDP Intensity


2.5 0.30

Intensity (MMTOE/Rs. '000 Cr.)


2 0.25

0.20
1.5

0.15
1
0.10
0.5
0.05

0
0.00
'68-74 '74-79 '84-89 '89-94 '94-99 '99-04 '68-69 '75-76 '82-83 '89-90 '96-97 '03-04
Energy Oil (Q)
Energy Oil Gas

Source : MoPNG, CSO, PwC Analysis


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Macroeconomic and Energy Indicators
Despite fuel prices being high on PPP basis, import dependent R&M
companies seek to raise consumer prices to recover costs and remain
financially strong. Domestic production is therefore a thrust area.
UK Netherlands
Germany UK
Netherlands Germany
Hong Kong France
Japan Japan
West Bank & Gaza Israel
Mongolia India
Lao PDR Cambodia
Korea, North New Zealand
Tajikistan Sri Lanka
USA Myanmar
Singapore Lao PDR
Myanmar Armenia
Russia Pakistan
Kyrgyz Republic Jordan
Sri Lanka Diesel Price Nov 2004 Russia
Gasoline Price Nov 2004
New Zealand
in US Cent per Litre Thailand in US Cent per Litre
Thailand Philippines
Bangladesh Vietnam
Uzbekistan China
Oman Azerbaijan
Malaysia Uzbekistan
Brunei Oman
Indonesia Indonesia
Syria Saudi Arabia
Yemen Yemen
Iran Venezuela
Iraq Turkmenistan

0 50 100 150 0 50 100 150


PetroFed: India Oil & Gas Overview & Opportunities Source : GTC, International Fuel Prices 2005
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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Overview of Petroleum Sector

Coal was the primary source of commercial energy and diesel


was the highest consumed refined fuel in 2004-05
Commercial Energy (333 MMTOE) POL
18%
and Gas (158 MMTOE)
4%
3% HSD & LDO
28%
LPG

Kerosene
7% Petrol
39%
Naphtha

6% ATF

LSHS &FO
2% 7%
Bitumen
46%
9% Others
6%
RBF
2%
6%
9% NG

8%

PoL (Incl RBF) Natural Gas Coal


Lignite Others

Source : MoPNG, PwC Analysis

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Overview of Petroleum Sector

Robust hydrocarbon demand imparts element of necessity of sector


development for sustained economic growth and the GoI recognizes
latter would be compromised if supply challenges are not met.
CAGR Multiple in
CAGR of Products and NG upto 2030 under BAU & HOG Scenario, per cent (%) 27 years
4 2.9
10%
9.1%
4.5 3.3
8.3%
8.0% 5 3.7
8%

6.9% 6.9% 5.5 4.2


6.2% 6.3%
6.0% 6.0%
6% 5.6% 6 4.8
5.1%
4.5% 4.7% 6.5 5.5
4.0%
4% 7 6.2

7.5 7.0
1.8%1.8%
2% 8 8.0

8.5 9.0
0%
9 10.0
NG + NG POL excl. HSD, LDO LPG and LPG Petrol LSHS and ATF Bitumen
equivalent of Naphtha Equivalent Equivalent of Equivalent HFO
Naphtha SKO
Source : PetroFed projections by PwC-IRADe
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Overview of Petroleum Sector

Oil & gas sector is crucial to Indian economy. Apart from fuelling
it, the fiscal contributions by sector are significant.

Largest contributor to exchequer in 2004-05 USD 27 bn

Sixth largest crude oil consumer in the world 119.3 MMT

Crude imports as total imports exports & imports 33 & 31% resp.

All 5 Indian companies in F500 operate in the Oil & Gas sector

Ranks 6th in world refining with 3% capacity. 3rd largest refinery.

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Overview of Petroleum Sector - Upstream

Attractive fiscal and contractual terms with recently demonstrated


prospectivity is fast changing investor’s perception about India’s
upstream sector
Key Facts NELP Success
• 26 sedimentary basins: 3.14 mn sq kM (1.39 • 110 PSCs signed in the last 5 rounds
mn sq kM onland and 1.75 mn sq kM offshore • NELP VI – 55 O&G and 10 CBM blocks on
offer
• Hydrocarbon resources: 28 BTOE (<25%
• Exploration coverage has trebled from 0.35
established)
mn sq kM in 2000 to 1.04 mn sq kM in 2005
• 22% area unexplored with another 22% area • World class O&G discoveries by RIL, Cairn
poorly explored and GSPC
• Directorate General of Hydrocarbons (DGH) • $US 5 bn committed under NELP I to V
invested with upstream regulatory functions
Major Upstream Players - Production
• Crude oil prodn – 29.36 MMT (April’05 – Feb’06) Pvt/JV
14%
• RIL, BG, GSPC, HOEC,
• E&P interests in 13 countries of OVL and in OIL
10%
more by other PSUs/ Pvt companies Cairn Energy, Niko

ONGC Resources, Hardy,


76%
Jubilant Enpro
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Overview of Petroleum Sector - Downstream

India is refining surplus and plans to be an export hub leveraging on


capability to operate at high refining margins
Major Downstream Players Key Facts
Refining capacity (MMTPA) • No. of refineries - 18
ONGC
8% • Installed refining capacity – 127.37 MMT (’04-05)
HPCL
10%
• Total Crude Throughput – 124.30 MMT (’04-05)
IOC
42%
BPCL • 99.8% capacity utilization in 2004-05
14%
• Petroleum product consumption – 111.71 MMT
RIL
26% • Petroleum product consumption registered over
3.5% yoy growth for last 3 years
Market Share of Petroleum Products (in Vol) • Petroleum product exports – 8.7 MMT
Pvt. ,
15.2% • New entrants in the oil marketing business include
RIL, Shell, EOL, MRPL and NRL
IOC,
Other(PS
Us), 6.2%
43.0% • Auto sales 14.2% CAGR (’04-05 over ’00-01)

HPCL, • Over 31,500 retail outlets including private


17.1% companies
BPCL,
18.5%
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Overview of Petroleum Sector – Natural Gas

Natural gas market is supply constrained and needs to be developed.

GAIL’s Proposed National Gas Grid Supply scenario

• In-place reserves up by 50% in last 2 ½ years

• Natural Gas prodn – 29.39 BCM (April’05 – Feb’06)

• New domestic discoveries – RIL, GSPC and


ONGC on the east coast
• 2 operational LNG terminals at Dahej (5 MMTPA)
& Hazira (2.5 MMTPA) on west coast

Major Market Players


Production : ONGC, OIL, RIL, BG, NIKO, GSPC
Transmission : GAIL, GSPL, GSPL
City Gas : IGL, MGL, GGCL, AGCL, BGL
LNG : PLL, Shell

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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Destination India
India is poised to grow in energy consumption. Share of hydrocarbons
is expected to be constantly high. Combined with this, India has very
attractive investment environment.

The Facilitators
Young Talent Pool (>50% population <50 yrs age)
Growing Business Opportunities
Stable Political Environment
Strong Govt. Owned and Private Oil Companies
Attractive Income Tax Regime (Sec 44BB including)
Progressive Indirect Tax Regime Fast Maturing
VAT with credits
Goods & Services Tax with cross credits
Reduction in Customs Duty
Very attractive SEZ Act 2005
Cost competitive work force
G

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100% FDI allowed* in Petroleum Sector investments


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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Destination India – Opportunities in Upstream Sector

Foreign Direct Investments are allowed in Indian petroleum


sector. Upstream sector signifies complete liberalization
achieved. Various avenues are available for investors.

• Acquisition of Blocks under periodic bidding rounds - NELP

• Farm-Ins

• Technology tie-ups with PI with Indian oil companies

• Service contracts for Marginal Fields

• IOR/EOR projects – ONGC

• Open Acreage Licensing – the future way

• Acquisition of CBM blocks in periodic rounds


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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Destination India – Opportunities in Downstream Sector

Refinery investments are being planned by India for exports and


for petrochemical feed-stock purposes. Major oil companies can
participate in the activity.

• Refinery expansions and upgradation

• Grass-root refineries

• Integrated complexes – petrochemical & VA products

• Tankages and strategic storage

• Pipelines – crude and products

IOCs interested in retail marketing segment use refining or LNG investment


opportunities to help cross the minimum investment condition for retail market entry

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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Destination India – Opportunities in Natural Gas Sector

The allied infrastructure needs strengthening. Gas demand and


supply imbalance would call for import infrastructure.

• Gas grid connecting producing and consuming locations

• LNG regasification terminals

• Gas Distribution networks

• Fractionators / Extractions

• Petrochemical and VA products

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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Destination India – Opportunities in Services Sector

More than 800 wells are committed for blocks awarded upto
NELP V. The number would go up with ensuing rounds and with
discoveries. Service sector is to be in demand.
900
800
700
600
500
400
300
200
100
0
2005 & 06 2007 & 08 2009 & 10 2011& 12 Total
ONGC RIL Others Total

Government of India has recognized need for quality, timely and cost optimal
services for upstream sector and is ready to offer best investment environment
to companies.
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Agenda

Macroeconomic & Energy Indicators


Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines

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Destination Philippines – Opportunities

In many ways the petroleum sector is well liberalized in


Philippines offering opportunity to Indian companies. The
delegation may guide the industry accordingly.

• PNOC stake sale in Malampaya. Opportunity?

• Refineries at 80% capacity. Opportunity for new refineries?

• Development of upstream resources. September rounds?

• Deregulation caused retail market rush. Space for new entrant?

• Market determined pricing. New Players’ Association active?

• LNG supply by BP yet to be binding. Scope of gas distributors?

• City gas & CNG transports. Opportunity for Indian companies?


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Thank you

India Oil & Gas Practice


PricewaterhouseCoopers Pvt. Limited
Sucheta Bhawan
11- A, Vishnu Digamber Marg
New Delhi – 110 002
Hotline: +91 (11) 23216023
Fax: +91(11) 2321 0594/6
deepak.mahurkar@in.pwc.com

  
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Upstream

Upstream sector in India is a relatively unexplored market with reserves


estimated in 15 of the 26 sedimentary basins.

NELP

• Policy approved in Feb 1997

• International competitive bidding

• Single window ECS approval mechanism

• Up to 100% foreign participation

• Fiscal stability provision

• Level playing field – NOCs vs. Pvt companies

• Contract finalization based on MPSC

• Freedom to market O&G in domestic market

• No signature, discovery or production bonus

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